Utilization Guide. for Korea-US FTA

Transcription

1 Utilization Guide for Korea-US FTA Sep, 2012

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3 Utilization Guide for Korea-US FTA September, 2012

4 Textile & Apparel Goods Utilization Guide for Korea-US FTA

5 Contents Chapter What Is FTA? 01 Chapter Tariff Concessions under Korea-US FTA 01 Chapter Comparison of Tariff Rates on Major Goods 03 Chapter Origin Determination 04 Chapter Steps to Use Korea-US FTA 06 Chapter Additional Information 13

6 Korea Customs Service I. What is FTA? A Free Trade Agreement is an agreement reached between two or more countries in order to further facilitate trade by eliminating trade barriers, such as tariffs, from the trade of products and services among them. - The FTA, recently come into force between Korea and the United States, has eliminated tariffs on almost all products traded between the two countries. - Tools to help utilize Korea-US FTA II. Tariff Concessions under Korea-US FTA The level of concessions that the United States has made, involving tariffs to be immediately eliminated, affects 61% of the total value of all textile & Apparel goods imported from Korea, or 87% of the total number of the items bound. The tariffs on the majority of the imported textile goods of the US, such as sweaters (U.S. tariff rate = 32%), socks (U.S. tariff rate = 13.5%), and men s trousers made of synthetic fibers (U.S. tariff rate = 28.2%), have undergone immediate tariff elimination. - The average tariff rate on imported textile and apparel good of the U.S accounts for 13.2%. - In particular, the tariffs on the 164 items of textile goods of which Korea is a major manufacturer, including sweaters (tariff rate = 32%), polyesters (tariff rate = 4.3%), socks (tariff rate = 13.5%), and men s shirts (tariff rate = 28%), have been eliminated. 1

7 Comparison of Final Concessions Made by Korea and the U.S. Elimination Period No. of Items Korea Proportion Import Value Proportion Elimination Period The United States No. of Items Immediate 1, Immediate 1, , In 3 yrs In 3 years In 5 yrs In 5 years In 10 yrs In 10 years Total 1, % % Total 1, % 2, % Major Items Bound by Concessional Terms in Each Phase Elimination Period Korea Proportion United States Immediate Denim, polyamide yarns Sweaters, socks, short synthetic staples In 3 years Cellulose yarns, glass fibers N/A (Units: USD 1 million, %) Import Value Proportion In 5 years High-tenacity polyamide yarns Polyester yarn fabrics, cotton shirts for men In 10 years N/A Part of synthetic knitted goods, tire cord fabrics 2 I. What Is FTA? II. Tariff Concessions under III. Comparison of Tariff Rates Korea-US FTA on Major Goods IV. Origin Determination V. Steps to Use Korea-US FTA VI. Additional Information

8 Korea Customs Service III. Comparison of Tariff Rates on Major Goods Major items of textile & apparel goods that are exported to the United States in quantity-basis and that are subject to preferential tariff treatment under the FTA 8-digit HS Code Product Description Tariff Rate Preferential Tariff Rate Remarks (free year) Woven fabrics of cotton Woven fabrics of synthetic filament yarn Synthetic staple fibers Tire cord fabric Knitted or crocheted fabrics Warp knit fabrics Other knitted or crocheted fabrics Panty hose, tights, stockings, socks and other hosiery (of cotton) Panty hose, tights, stockings, socks and other hosiery(of synthetic fibers) Gloves, mittens and mitts, knitted or crochetedgloves, mittens and mitts, knitted or crocheted Other items of textiles 5.3 0%

9 IV. Origin Determination 1. Originating Textile & Apparel Goods Textiles and apparel products may qualify as originating under the KORUS FTA if they meet the requirements as specified in the Agreement. Below is a summary of the types of processes required for some of the more basic textile products in order for them to be considered eligible for preferential tariff treatment under the KORUS FTA. There are exceptions even to these requirements, depending on the product being imported. For more specific information refer to Annex I of the Modification to the HTS to for apparel in Chapter 61&62 and made-up textile articles in Chapter 63 only the component that determines classification must meet the tariff shift rules. a) Yarn: Generally, fiber must originate in Korea or the United States to qualify for preferential tariff treatment. b) Fabric: Generally, yarn must originate in Korea or the United States in order for the fabric to qualify for preferential tariff treatment. c) Apparel: Generally, yarn must originate in Korea or the United States for the apparel to qualify for preferential tariff treatment. 4 I. What Is FTA? II. Tariff Concessions under III. Comparison of Tariff Rates Korea-US FTA on Major Goods IV. Origin Determination V. Steps to Use Korea-US FTA VI. Additional Information

10 Korea Customs Service Change in Tariff Classification (CTC) Good is regarded originating if the HS code of the good is different to the HS codes of the outward materials used in the production of the good. CTC is based on the tariff classification. Thus, correct classification is one of the most important elements. Types of Change in Tariff Classification a) CC (Change of Chapter): Change in the first 2 digits b) CTH (Change of Tariff Heading): Change in the first 4 digits c) CTSH (Change of Tariff Sub-Heading): Change in the first 6 digits 3. De-Minimis A textile or apparel good that is not an originating good because certain fibers or yarns used in the production of the component of the good that determines the tariff classification of the good do not undergo an applicable change in tariff classification, shall be considered as originating if the total weight of all such fibers or yarns in that component is not more than 7 percent of the total weight of that component.. 4. Transit and Transshipment Goods that undergo further production outside the territory of the Republic of Korea or the United States, other than unloading, reloading or other processes to preserve the condition of the good or to transport the good to the territory of Korea or the United States, or goods that do not stay under customs control in the territory of a non-party, will not be considered originating. Example of Product Specific Rules (Overcoat for men/boys made of manufactured textiles): The Chapter (the first two digits) of the HS code of the product has been changed into Such change excludes headings 5106 through 5113, 5204 through 5212, 5307 through 5308, 5310 through 5311 and 5401 through 5402, and sub-headings , through , through 5408, 5508 through 5516 and 6001 through The overcoat must have been cut out or knitted, sewn, and/or stitched up in one or both parties under the FTA. Change in Tariff Classification Yarn Forward Rule (The materials of the stated HS code shall be originating) Specific Manufacturing Process For confirmation of Preferential Criterion under Korea-US FTA, please visit 5

11 V. Steps to Use Korea-US FTA Step 1 Confirmation of Correct HS Code 1. What are the HS Codes The World Customs Organization (WCO) has developed and upholds the Harmonized Commodity Description and Coding System (HS) as an internationally accepted standard for categorizing various traded goods, facilitating the collection of trade-related statistics and tariffs on them. Most FTA contracting countries worldwide have adopted the HS Convention. - The first six digits of HS codes are common worldwide. - From the seventh digit of HS code varies from country to country. Korea uses 10-digit HS code whereas the United States uses 8-digit numbers. The first two digits of a traded good s HS code indicate its main category. The next two digits indicate its intermediate category, and the fifth and the sixth digits indicate its sub-category. For example, the six-digit HS code for a sweater is Main Category Interm. Category Subcategory 2. Enjoying Benefits from Korea-US FTA Begins with Identifying Exact HS code Preferential tariff rates and Preference criterion base on each HS code under the FTA. Please visit: for more information. 3. How to Identify Correct HS code Please visit: The first six digits are common worldwide. Should you still undergo difficulties after visiting the above webpage, you may request for a consultation from a customs specialist in your region or apply for advance ruling to CBP. 6 I. What Is FTA? II. Tariff Concessions under III. Comparison of Tariff Rates Korea-US FTA on Major Goods IV. Origin Determination V. Steps to Use Korea-US FTA VI. Additional Information

12 Korea Customs Service Step 2 Checking Benefits from Preferential Tariff Treatment 1. Eligibility for Preferential Tariff Treatment to be Applied Check whether the goods you want to import are subject to preferential tariff treatment under Korea-US FTA. Compare the Basic* and Preferential Tariff Rates**. * Basic Tariff Rate: tariff rate imposed on imported goods in general, regardless of the FTA. ** Preferential Tariff Rate: tariff rate that is either eliminated or reduced as a result of the FTA. * To see the list of goods subject to preferential tariff treatment and their tariff rates, visit: Benefits from Use of FTA: Benefits from preferential tariff treatment in the trade of goods are associated with the difference between Basic Tariff Rate and Preferential Tariff Rate applicable to the good. Tariff benefit applied to the U.S. importer when importing sweaters from Korea (HTS ): (Tariff benefit 32%) = MFN Rate (32%) - Preferential Tariff Rate (0%) Before Korea-US FTA (a) Tax Base: USD 1,000 (b) Tariff: (a) 32% = USD 320 (c) Merchandise Processing fee: (a) 0.34% = USD 34 (d) Total: USD 354 After Korea-US FTA (a) Tax Base: USD 1,000 (b) Tariff: (a) 0% = USD 0 (c) Merchandise Processing fee: (a) 0% = USD 0 (d) Total: USD 0 Tariff in total before the FTA into force (USD 354) - Preferential Tariff after the FTA into force (USD 0) = USD 354 Tariff Reduction for sweaters imported from Korea! 7

13 Step 3 Preparation of Certificate of Origin (C/O) 1. Requesting and Obtaining C/Os: Request for issuance of C/O regarding the goods in question is to be made to the exporter or producer of the FTA partner country. The importer may receive the C/O along with other documents related import. In terms of Korea-US FTA, importers are entitled to issue C/Os. Thus, the importers are able to issue C/Os even though C/O is not provided by the exporter or producer. 2. Issuing C/Os FTAs excluding Korea-US FTA generally have specific forms of C/O that the importers and exporters of the contracting parties shall comply with. Whereas, there is no specific form of C/O under Korea-US FTA, however following data elements must be contained; Data Elements for the KORUS FTA Certification of Origin (CBP) I. What Is FTA? II. Tariff Concessions under III. Comparison of Tariff Rates Korea-US FTA on Major Goods 1. Name and address of the importer: The legal name, address, telephone, and of the importer of record of the good. 2. Name and address of the exporter: The legal name, address, telephone, and of the exporter of record of the good. (If different from the producer) 3. Name and address of the producer: The legal name, address, telephone, and of the producer of record of the good. (If known) 4. Description of good: The description of a good shall be sufficiently detailed to relate it to the invoice and the Harmonized System nomenclature. 5. HS tariff classification number: The HS tariff classification, to six or more digits, as specified for each good in the Rules of Origin. 6. Preference criterion: The rule of origin set forth in General Note 33(b) or Article 6.1 of the Agreement. In the case of a productspecific rule specified in General Note 33(o) or Annex 4-A or 6-A of the Agreement, please be specific as to which rule was applied. 7. Single shipment: Provide the commercial invoice number. 8 IV. Origin Determination V. Steps to Use Korea-US FTA VI. Additional Information

14 Korea Customs Service Multiple shipments of identical goods: Provide the blanket period in mm/dd/yyyy to mm/dd/yyyy format. (12-month maximum) 9. Authorized signature, company, title, telephone, fax, , and certification date: The signee must have access to the underlying records and the legal authority to bind the company. This field shall include signature, company, title, telephone, fax, and Certification: I certify that: The information on this document is true and accurate and I assume the responsibility for proving such representations. I understand that I am liable for any false statements or material omissions made on or in connection with this document; I agree to maintain and present upon request, documentation necessary to support these representations; The goods comply with all requirements for preferential tariff treatment specified for those goods in the United- Korea Free Trade Agreement; and This document consists of pages, including all attachments. Signature: Title: Phone Number: Address: Date: NOTES: Keep in mind when issuing C/Os under Korea-US FTA; - The certification may cover a single importation or multiple importations of identical goods within a maximum 12 month period; and - Valid period: effective for four (4) years from the dates of their original issuance under Korea-US FTA. No C/Os required for imported goods worth USD 2,500 or less 9

15 Step 4 Claim for Preferential Tariff Treatment 1. Claim Procedure Claim is made by placing the KR on the entry summary (CBP Form 7501). Identify the applicable tariff rate Have a written/electronic certification at the time the declaration is made Provide a copy of the certification, on request, to the government When the importer has reason to believe that the declaration is based on inaccurate information, correct the importation document and pay all duties and merchandise processing fee. Penalties will not be assessed when the importer promptly and voluntarily makes a corrected claim and pays and duties owing. Importer may make a post-importation claim for preferential treatment under the KORUS FTA, within one year of importation. The importer shall submit a claim in writing to the port of entry, to include: 1) A written declaration stating that the good qualified as an originating good at the time of importation and the number and date of the entry or entries coving the good; 2) A copy of a certification containing the required data elements demonstrating that the good originated at importation; 3) A statement indicating whether the entry summary or equivalent documentation was provided to any other person; 4) A statement indicating whether a protest, petition or request for reliquidation has been filed relating to the good and identification of such filing(s) 2. Correction of False/Unsupported KORUS FTA Claim An importer who has made a false or unsupported preference claim must submit a correction within 30days of discovery and pay all duties and merchandise processing fee(mpf). Penalties will not be assessed when the importer promptly and voluntarily makes a corrected claim and pays any duties owing. 10 I. What Is FTA? II. Tariff Concessions under III. Comparison of Tariff Rates Korea-US FTA on Major Goods IV. Origin Determination V. Steps to Use Korea-US FTA VI. Additional Information

16 Korea Customs Service Step 5 Record-Keeping 1. Reasons for Record Keeping Verification on the importer regarding whether or not the preferential tariff treatment was duly granted in compliance with the law is conducted after the import clearance. It is therefore mandatory for importers to keep all the relevant documents, including the certificates of origin issued by the exporter or the producer, in order to prove the country of origin of the good in question. Violation of this record-keeping rule may not only deprive the importer of the benefits from preferential tariff treatment, but even lead to penalization under the criminal law of the importer s jurisdiction. 2. Record-Keeping Period and Documents to be Kept Importers are required to maintain all certifications in their possession and all records related to the importation for five years from the date of importation 11

17 Step 6 Origin Verification Under the KORUS FTA, the importer is responsible for substantiating the validity of a preference claim. This preference claim may be based on a certification, other documentation, or the importer s knowledge. CBP will initiate verification via a CBP Form 28, Request for Information, to the importer. Upon request, the importer shall provide the certification and documentation supporting the certification. Importer should be prepared to substantiate the originating status of the goods with documentation such as, but not limited to, the following: - Flow charts, technical specifications and other documents explaining the manufacturing process; - An explanation of how the good meets the rule of origin - A bill of materials showing the classification number, origin, and cost (if the good is subject to a RVC calculation) of each material. - A certification of origin or affidavit corresponding to each originating material that fails the prescribed tariff shift; otherwise, the material may be deemed non-originating; - Purchase orders and proof of payment to substantiate values; - Documentation pertaining to assists, inventory management methods, indirect materials, etc.; or - Other documentation, as needed. I. What Is FTA? II. Tariff Concessions under III. Comparison of Tariff Rates Korea-US FTA on Major Goods Importer is responsible for ensuring that adequate substantiating documentation is provided to CBP upon request. The producer may elect to provide this documentation directly to CBP to protect its confidentiality. Subsequent to the initial contact with the importer, CBP may, at its discretion, communicate directly with the exporter or producer. CBP may verify the originating status of a good by means of a verification visit to the exporter or producer in accordance with procedures established by the Parties. KORUS FTA Implementation Instruction _US CBP 12 IV. Origin Determination V. Steps to Use Korea-US FTA VI. Additional Information

18 Korea Customs Service VI. Additional Information 1. Exemption from Merchandise Processing Fee (Article 2.10) Thanks to the Korea-US FTA, those who import Korea-originating goods under Korea-US FTA do not have to pay merchandise processing fees. Unconditionally free goods with a KORUS FTA claim are subject to the same certification and verification requirements as dutiable goods. Classification Legal Basis and the Target Details Merchandise Processing Fees Consolidated Omnibus Budget Reconciliation Act (1985) Ad-valorem duties applied categorically to all imported goods. Not applicable to goods imported from (1) protectorate states of the United States; (2) the least developed countries; (3) certain Caribbean states that are beneficiaries of preferential tariffs. For formal entries: % of the value of merchandise ($25 minimum and $485 maximum). For informal entries: - USD 2 for automatic declaration; - USD 6 for manual declaration made by the importer; and - USD 9 for manual declaration made by the customs Authority. 2. Advance Ruling System Those (including importers, exporters, producers, and their duly authorized representatives in the FTA contracting countries), who are unsure of whether their goods satisfy preference criterion, may apply for advance ruling prior to the import declaration to the Customs authorities in the region. a. Eligibility: open to importer, exporter and producer/ prior to importation declaration b. Scope of Ruling: tariff classification, determination of price and country of origin, applicable quotas or tariff rates, and indication of country-of-origin of the good in question etc. c. Apply online: Additional information is available on at: 13

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20 Government Complex Daejeon 189 Chungsa-ro Seo-gu Daejeon , Korea